Practical analysis for investment professionals
06 May 2014

Innovative Research into Structured Credit Products (Podcast)

Posted In: Fixed Income

Asset-backed securities have been subject to heated debate since the financial crisis, but William F. Maxwell says that even though “so much of the financial crisis revolved around these asset-backed securities, . . . there’s almost no information out there on how these different products actually trade.” Maxwell and his coauthors, Hendrik Bessembinder and Kumar Venkataraman, examined newly disseminated data from the Financial Industry Regulatory Authority for an article in the November/December 2013 issue of the Financial Analysts Journal titled “Trading Activity and Transaction Costs in Structured Credit Products.” We talked to Maxwell about his team’s research as part of our ongoing FAJ author interview series.

“The thing that really got us interested in the market was, first of all, just the sheer size and scope of structured credit products,” he says. “It’s similar in size to the Treasury market.” But he’s quick to point out that structured credit product transactions are unique. “It’s an opaque market, and these things trade very infrequently. . . . The idea of a bid — ask spread in a stock is very easy to understand; it’s very easy to calculate. But when you’re talking about something that doesn’t trade for big gaps in time, then it’s much more difficult.”

Maxwell says that practitioners who are thinking about entering these particular markets need to understand their ability to exit before they commit, and he hopes that his team’s research “serves as an information source for anyone who would be trading in the products.”

To hear Maxwell’s thoughts on this groundbreaking research, listen to the full interview (above) or download the MP3.

CFA Institute members can access the full journal article on the CFA Institute Publications website.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.


About the Author(s)
Pat Light

Pat Light was an assistant editor at CFA Institute. Before joining the CFA Institute editorial staff, he worked as a teacher. Light has a bachelor's degree in English from Duke University.

Leave a Reply

Your email address will not be published. Required fields are marked *

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.